Case Opens Up LBO Payments To Fraudulent Transfer Claims

Law360, New York (January 27, 2014, 1:17 PM ET) -- On Jan. 14, 2014, the U.S. Bankruptcy Court for the Southern District of New York held that the Bankruptcy Code’s § 546(e) safe-harbor provision[1] neither protects against nor preempts state law constructive fraudulent transfer claims brought on behalf of individual creditors against cashed-out former shareholders of a company acquired in a leveraged buyout.

By refusing to dismiss these claims, prosecuted by a creditor trust pursuant to a confirmed plan of reorganization, Bankruptcy Judge Robert E. Gerber’s opinion in Weisfelner v. Fund 1 (In re Lyondell Chemical...